The next great crisis for the United States, at least as David Boies of Boies, Schiller & Flexner sees it, is unfunded pension liability for city and state governments. "This is a $5 trillion issue," Boies told me in a phone interview Wednesday. "Unless we solve this problem, everyone is in jeopardy -- cities and states, those who depend on their services, even employees of cities and states." Boies predicts an unprecedented wave of government bankruptcies if elected officials don't take action.

Boies is also putting his money where his mouth is. On Wednesday, he and Boies Schiller associate Julia Hamilton moved for admission to the state courts of Rhode Island, where police, firefighters, teachers and thousands of other state and local employees and retirees are challenging sweeping pension overhaul legislation passed last November. Boies and Hamilton will be advising the state officials named as defendants in five Rhode Island Superior Court suits asserting that the 2011 law -- which, among other things, suspended cost-of-living adjustments, raised the retirement age and shrunk the defined benefit component of pensions -- violates the contract, takings and due process clauses of the Rhode Island constitution. And according to state treasurer Gina Raimondo -- a Yale-trained lawyer, former venture capitalist and architect of the pension overhaul -- Boies is charging the state a whopping $50 an hour.

Raimondo, who's a defendant in the pension overhaul suits, along with Governor Lincoln Chafee and the state pension board director, told me she approached Boies several weeks ago, after deciding the state needed a constitutional law expert. "The enormity of the consequences of this case is hard to overstate," Raimondo said. The pension overhaul addressed a $7 billion unfunded liability and a plan that was less than 50 percent funded. If the challengers succeed in overturning the law, Raimondo said, cities in Rhode Island will have to come up with $100 million next year alone. "That would spell financial catastrophe for the state of Rhode Island," she said.

Boies was intrigued by the national implications and constitutional considerations of pension reform. He also admired t h e way Rhode Island accomplished its overhaul. Raimondo was a Democrat and Chafee a onetime Republican who ran for governor as an independent, and the legislation had broad support in both houses of state government. "This was a bipartisan effort, led by Democrats, attempting to reform state finances in a way that will benefit everyone," Boies said. "It doesn't help employees to have an employer that's insolvent."

In Rhode Island, the state pension system was established by the legislature in 1936, and thereafter its terms have been governed by state law, not by collective bargaining agreements or other private contracts. The state employees and retirees challenging the new law argue that the pension terms amounted to a contract between the state and workers and retirees who contributed to the plan and expected to receive promised pension benefits in return. "We paid for these," said J. Michael Downey, president of the state's largest public employee union, Rhode Island Council 94 of AFSCME, AFL-CIO. "We did everything we were supposed to. We were vested into the system. If there were abuses, they did nothing to fix them."

In August, the state's outside lawyers at Adler Pollack & Sheehan filed a motion to dismiss the lead case challenging the pension overhaul law. According to the brief, there's a fundamental flaw in the employees' suits: Rhode Island has no contractual obligation to workers and retirees because its pension system is a creature of statute. Rhode Island law, the brief said, dictates a strong presumption against reading contractual obligations into statutes, and there's no clear indication in the language of state pension laws of the legislature's intent to create enforceable obligations. (Adler Pollack will work with Boies Schiller as the case progresses; a hearing on the state's motion to dismiss was moved from October to December.)

Clearly, the threshold question in the Rhode Island litigation will be whether the workers can claim that their pension benefits were constitutionally protected property. Given that Rhode Island is in the minority of states whose pension systems are governed by statute, I asked Boies whether the Rhode Island case would even set relevant precedent for other states facing pension shortfalls, most of which have pension plans whose terms are set in contracts or collective bargaining agreements. Boies conceded that if Rhode Island wins on the no-contract question, the state Supreme Court (where the case will inevitably end up) might not even hear any arguments that the public interest in restoring fiscal stability justifies impairing pensioners' contractual rights.

But Boies also said, that's not the only reason he's interested in the Rhode Island case. "This is not just a legal question," he said. "It's a political question, a question of how we're going to reform the finances of city and state governments." If other states see that Rhode Island has succeeded in passing an overhaul and turning back a court challenge, he said, they may follow.

Union President Downey said he's not scared of Boies, even after I told him that Boies represented Al Gore at the Supreme Court in Bush v. Gore. "I guess the state got a bargain, hiring him for $50 an hour," he said. "It won't change our opinion that what the treasurer did was wrong. It wasn't a bipartisan law. It was political, for (Raimondo). Boies didn't do much good for Al Gore. Maybe he won't do much harm to the public employees of Rhode Island."

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